Principles of Business LO3 and 4

• Business Administration
• Higher Education (non-degree)

Principles of Business LO3 and 4

Name as many business start up costs as you can think of

Current assets

1. These are what a business owes in the short term
2. These are assets that will be used or sold up in the next year plus the cash balances kept in the business
3. This is the amount of money available for the day to day running of the business that may need to pay for outstanding debts, but do not have enough spare cash to do so.
4. This is the amount of long-term money put into the business to buy assets. The main form is the owner’s money (share capital)

Current Liabilities

1. These are what the business owes in the short term
2. These are assets that will be used or sold up in the next year plus the cash balances kept in the business
3. This is the amount of money available for the day to day running of the business that may need to pay for outstanding debts, but do not have enough spare cash to do so.
4. Capital in the bank and the cash box

Cash

1. These are what the business owes in the short term
2. These are assets that will be used or sold up in the next year plus the cash balances kept in the business
3. This is the amount of long-term money put into the business to buy assets. The main form is the owner’s money (share capital)
4. Capital in the bank and the cash box

Capital

1. This is the amount of long-term money put into the business to buy assets. The main form is the owner’s money (share capital)
2. These are the monies the business has borrowed for a period of more than a year-mainly bank loans
3. Capital in the bank and the cash box
4. This is the amount of money available for the day to day running of the business that may need to pay for outstanding debts, but do not have enough spare cash to do so.

Working Capital

1. These are what the business owes in the short term
2. This is the amount of money available for the day to day running of the business that may need to pay for outstanding debts, but do not have enough spare cash to do so.
3. These are assets that will be used or sold up in the next year plus the cash balances kept in the business
4. These are the monies the business has borrowed for a period of more than a year-mainly bank loans

Long Term Liabilities

1. These are what the business owes in the short term
2. These are assets that will be used or sold up in the next year plus the cash balances kept in the business
3. This is the amount of money available for the day to day running of the business that may need to pay for outstanding debts, but do not have enough spare cash to do so.
4. These are the monies the business has borrowed for a period of more than a year-mainly bank loans

Current Asset

Fixed Asset

Stock

Money in the bank

Debtors

Money in the till

Fixtures

Property

Equipment

Vehicles

List the following from most liquid to least liquid.
Debtors, money in bank, stock, cash

Explain why stock on hand is not as liquid as cash or debtors?

An electricity bill is an example of a

1. Current asset
2. Fixed term asset
3. Current liability
4. Long-term liability

Liabilities can be good for a business to hold. Provide an example of why having liabilities is a positive thing for a business.

Complete the sentence from the video:
In order to survive, a business should have....

VAT

Capital Gains

Expenditure

Revenue

A consumption charge that is applied at each stage of production based on the value added to the product at that stage

The amount by which an asset's selling price exceeds its initial purchase price. This tax is payable on most investments sold at profit.

Money spent in generating sales or in maintaining an asset

The income generated from the sale of goods or services, or any other use of capital or assets, associated with the main operations of an organisation before any costs or expenses are deducted

Gross profit

Turnover

Cash Flow

Balance Sheet

The amount of money a business earns from its sales after subtracting the direct costs of producing or buying the goods or services sold.

Annual sales volume net of all discounts and taxes

The movement of cash in and out of a business from day-to-day direct trading and other non-trading or indirect effects, such as capital expenditure, tax and dividend payments

One of the three essential measurement reports for the performance and health of a company, along with the profit and loss account and cash flow statement.  It is a snapshot in time of who owns what in the company.  Capital + Liabilities = Assets

What is the first step in managing a budget

1. Cut all unnecessary spending​
2. Review last year’s accounts​
3. Set clear financial goals
4. Cancel all subscriptions

What is meant by “tracking your spending”?​

1. Guessing how much money was spent​
2. Writing a shopping list
3. Recording actual income and expenses
4. Asking your manager for more money

Why is it important to compare actual spending to the budget?​

1. To see if you've made a mistake​
2. To impress your boss​
3. To identify variances and take action
4. To justify higher pay

What should you do if you overspend in one area?​

1. Ignore it​
2. Take action and adjust the budget
3. Hide the numbers​
4. Spend more elsewhere

What’s the final step in managing a budget?​

1. Spend what’s left​
2. Close your account​
3. Review and improve
4. Ask for a loan

What does a master budget include?​

1. Only the expected cash flow for the month​
2. Plans for investing in large equipment​
3. A complete summary of all smaller budgets, including income and expenses
4. Just the marketing budget

Which budget focuses on daily and monthly expenses like wages, rent, and materials?​

1. Capital Budget
2. Operational Budget ​
3. Financial Budget​
4. Cash Flow Budget

What is the purpose of a capital budget?​

1. To track regular day-to-day expenses
2. To show how much profit the company made​
3. To plan for large investments like buildings or vehicles ​
4. To monitor staff attendance

Which budget helps predict when money will enter or leave the business?​

1. Cash Flow Budget
2. Operational Budget
3. Master Budget​
4. Capital Budget

What is a financial budget mainly concerned with?​

1. Future income, expenses, and overall financial position
2. Daily operations​
3. Customer satisfaction​
4. Social media performance